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Compute the price of a forward contract on the same ZCB of the previous question where the forward contract matures at timet = 4 t
Compute the price of a forward contract on the same ZCB of the previous question where the forward contract matures at timet = 4t=4.
The price of the ZCB is 61.62
and instructions are:
should be answered by building ann =
n=10-period binomial model for the short-rate,r_{i,j}
ri,j
. The lattice parameters are:r_{0,0} = 5\%
r0,0
=5%,u = 1.1
u=1.1,d = 0.9
d=0.9andq =1-q = 1/2
q=1q=1/2.
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